One of the most misunderstood areas of the insurance business is claims handling. Often mishandled, this function is the reason companies buy insurance. To be certain the following four key elements are being managed effectively, there are several points to remember when evaluating your claims management program:
- Do you have an excellent working relationship with your carrier and intermediary [broker or third party administrator (TPA)], including a written agreement on roles, responsibilities (key performance indicators – KPI’s) and communication?
- A defined internal process for claim reporting, tracking and oversight of the claims-management process.
- Specific metrics that measure the effectiveness of claims management process, such as:
- What is the basis for reserves?
- How are trends increasing/decreasing?
- What are the “problem” claimants the company has and why?
- Does the company senior leadership (on down) have a strong commitment to the claims management protocols so that it has become part of the culture?
Depending on the frequency of claims and the type of severity you are experiencing, you should be having periodic claims review meetings where an agenda is prepared, specific claims are referenced, reviewed and detailed follow-up actions are noted. This should happen at least every six (6) months – more frequently with higher claim occurrence.
Applying all four elements will substantially reduce your TCoR by reducing both claim frequency and severity.
Albert L. Sica is the founder and managing principal of The ALS Group, an independent insurance and risk management consulting firm located in Edison, NJ.